Congress still afraid to define 'internet gambling'

The intellectual haze that envelopes American internet gambling policy thickened the past week, as lawmakers failed to define what exactly constitutes "unlawful" internet gambling. As absurd as it sounds, two years after the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA), Congress still can’t make up its collective mind as to what behavior the law is intended to cover.

A bill before the House Financial Services Committee would have blocked the Treasury Department and the Federal Reserve from enforcing the UIGEA. Even worse, it would have forced the lawmakers to define what constitutes illegal online gambling. Alas, the bill died, leaving our fine nation in the dark.

The UIGEA was attached in the middle of the night to a terrorism-related port security bill at the end of a congressional session, meaning that no one actually read it. The purpose of the law was to freeze internet gambling companies out of the American financial system, and the law put the onus on financial institutions to ensure that Americans were not gambling online.

Financial institutions have complained bitterly about bearing a financial burden more properly borne by the federal government’s own law enforcement agencies, and the Treasury Department has dragged its heels on the matter. There has never been any comprehensive federal law covering gambling, and prior federal law seemed to allow some forms of gambling while banning others. Even the World Trade Organization (WTO) got involved, when Antigua-Barbuda, a scrappy Caribbean internet gambling haven, filed (and won) a claim against the US before the international trade body.

"The financial institutions are in the position of being told not process bets, but it's not clear what is legal and what is illegal," said Representative Barney Frank, the committee's chairman, calling it "a job that is undoable." One of the main sticking points has been check processing, which is still largely done by hand.

Ironically, the law had an even greater impact than its drafters had probably hoped for, even though it has never properly gone into effect. The regulations were supposed to have been drafted over a year ago, but the mere passage of the law wiped billions off the market value of internet companies. Throw in a couple of arrests of prominent European gambling executives on other gambling charges, and the market was in chaos.

Certain types of remote gaming are allowed in the US under the law, such as gambling on horse racing or fantasy sports, and even in its twilight state short of full implementation, the UIGEA has widely been viewed as a hand-out to the domestic gambling industry. Gaming, in all its iterations, is an industry ideally suited to the internet medium, and Congress’s craven inability to define its own laws has left American operators out in the cold, or locked up in jail. Until Congress figures out what it wants to do with an industry they wish would go away, financial institutions and gamblers will remain in limbo. ®